isn't ready for no-deal Brexit – and 'secrecy' means businesses won't be either

7 months not enough time for firms to prep

The UK government has left its preparation for a no-deal Brexit too late, while secrecy around negotiations has left businesses unable to prepare, a report has said.

The latest missive to slam the government’s preparedness for the UK’s departure from the European Union comes from the Institute for Government think tank.

Brexit: six months to go (PDF), published today, said that crucial Whitehall systems unlikely to be in place by March 2019 if the government fails to negotiate a deal.

In this scenario, the IfG said, “just a fraction of the processes and systems required for life outside the EU will be in place” – there will be only time for “temporary sticking plasters”.

In an assessment of the policy areas that will be affected by a no-deal scenario, the IfG ranked all but EU programmes and funds red, meaning the government would not be able to mitigate major negative impacts of a "no deal" scenario.

Much of this work requires the efficient implementation of new IT systems, which can take decades to complete in even the best circumstances – and for which the government has a chequered past.

Some of the IfG’s concerns relate to the well-documented, like customs systems or Galileo, and the less discussed.

For instance, it said that the Department for Transport “has not yet begun implementing a number of new IT systems and databases it will need to issue permits” for cross-border travel, and progress on a new HMRC system for validating VAT registration numbers is “unclear”.

But one of the biggest problems highlighted in the think tank’s report is that businesses – which will also have to implement new technologies, systems and policies – have been left in the lurch. This will have a big impact on the UK’s overall ability to cope, the IfG said.

“Unlike negotiation and legislation, where the task falls squarely on the government to deliver, Brexit implementation depends on a wide-ranging web of external organisations,” the report said.

“There are more than 140,000 different businesses that will need to be ready for changes at the border alone, for instance. If a few critical ones are not prepared, it does not matter how ready the government is.”

The government’s decision not to publish technical notices on how to prepare for a no-deal situation until the end of last month means that companies and organisations have just over six months to get their plans in place.

“Waiting until August 2018 means it is likely to be too late for many businesses to meaningfully prepare,” the IfG said. Moreover, some notices were slim volumes that “contained significant gaps”.

Putting the task facing organisations into context, the IfG noted that efforts to digitise tax, which were introduced in 2015 with a full go-live date planned for 2020, had to be pushed back for small businesses to cope.

Traders were previously given 18 months to prepare for “relatively straightforward changes to customs systems,” the IfG said. In comparison, HMRC bosses admitted this month they hadn’t discussed no-deal plans with external software developers until the notices were published.

man in front of laptop puts head in hands - despairing's no-deal plans leave HMRC customs, VAT systems scrambling to keep up


Similarly, the UK’s new IT system for the chemical regulatory regime will be different to the EU’s and a recent report from the spending watchdog said the government had not considered the impact this would have on chemical companies.

Another major problem facing businesses is the continued flow of data between the EU and the UK. Although the government said data can be transferred into the bloc, it has to wait until after March 2019 before the EU will make an adequacy decision.

Without this, UK firms will have to rely on different means of data transfers – and the government last week advised them to start drawing up these contracts – which the IfG said “is likely to be particularly costly for SMEs”.

And, in case anyone was hoping the situation would be better if politicians do strike a deal, the IfG again warned that the transition period is shorter than most large-scale projects and that not everything would be ready by December 2020.

“Given the multiple scenarios, the fact that many details will not be agreed until the last minute at best, and the need to manage the Brexit negotiations and a challenging legislative task at the same time, implementing the kind of Brexit proposed by the UK Government in the transition period looks completely unfeasible,” it said.

“Even without these constraints, 21 months would have offered significantly less time than that required for other recent, and more straightforward, major projects.” ®

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